Brazil Slowdown Not Reflected In Economic Index

Is the official economy data from Brazil’s government skewed? One unidentified government official thinks so, saying it is worse than what was published. The Wall Street Journal writes:

Brazil’s economy is slowing at a much sharper pace than suggested by the central bank’s economic index, published earlier Wednesday, according to a member of the government’s economic team.

The central bank’s monthly Economic Activity Index for July showed a slight rebound in activity after declining in June. But the person, who asked not to be identified, said that the economy ended July at practically the same level as in May, which means zero growth.

The IBC-Br index is a monthly proxy for the quarterly gross domestic product number. It rose 0.46% in July, but that number was “statistically influenced by the low base of comparison, as there had been a decline of 0.25% in June,” according to the government official.

The data also show that growth over the last three months was 0.43% compared with the previous three months, which points to an annualized growth rate of less than 2%, the person said. That is a sharp slowdown from the three months ended in April, when growth registered 1.2%, or an annualized rate of 4.5%, according to the person.

“The central bank has signaled that in August they embarked on an easing cycle, probably because it ascribes a much larger probability of a significant drop in global growth than we currently do,” Goldman Sachs said.